## Facts

- The SEC brought a civil enforcement action alleging Brent C. Bankosky engaged in insider trading in violation of Exchange Act §§ 10(b) and 14(e) and Rules 10b-5 and 14e-3.
- From January 2008 to May 2011, Bankosky worked at Takeda Pharmaceuticals International, Inc. as a director and later senior director in licensing and business development.
- In that role, he had access to material nonpublic information about potential strategic transactions involving outside companies.
- Despite a corporate policy barring trading on inside information, Bankosky bought call options in four potential transaction counterparties before anticipated announcements.
- After transactions involving two of those companies were publicly announced, he sold the options for approximately $63,000 in profit.
- The parties resolved the merits in the district court through a consent judgment in which Bankosky neither admitted nor denied the complaint’s allegations; for purposes of a later remedies motion, the parties stipulated the complaint’s key allegations would be treated as true.
- Post-judgment, the SEC moved for an officer-and-director bar under Exchange Act § 21(d)(2), and the district court imposed a 10-year bar after applying the six-factor framework from SEC v. Patel.

## Issues

1. Whether the district court erred by relying on the Patel factors after the Sarbanes-Oxley amendment changed § 21(d)(2)’s standard from “substantial unfitness” to “unfitness.”
2. Whether the district court abused its discretion in concluding that a 10-year officer-and-director bar was warranted on these facts.

## Decision

- The Second Circuit affirmed the order imposing a 10-year officer-and-director bar.
- The court held the district court did not err in relying on the Patel factors despite the 2002 statutory amendment.
- The court held the district court did not abuse its discretion in determining that a 10-year bar was appropriate.

## Legal Principles

- Exchange Act § 21(d)(2), as amended in 2002, permits an officer-and-director bar upon a finding of “unfitness,” lowering the threshold from the prior “substantial unfitness” standard.
- The Patel six-factor framework (egregiousness, repeat offenses, role/position, scienter, economic stake, and likelihood of recurrence) remains a useful, non-exclusive guide to identifying evidence of “unfitness” under the amended statute.
- Imposition and length of an officer-and-director bar are reviewed for abuse of discretion; a district court acts within its discretion when it weighs mitigating and aggravating circumstances and selects a time-limited bar supported by the record.

## Conclusion

The Second Circuit upheld a 10-year officer-and-director bar based on insider-trading allegations treated as true for remedy purposes, concluding that the Patel factors remain an appropriate analytic tool after Sarbanes-Oxley and that the district court reasonably found Bankosky “unfit” under § 21(d)(2).


SEC v. Bankosky, 716 F.3d 45 (2d Cir. 2013)